How To Use A First Home Savings Account (FHSA)
The First Home Savings account is a savings and investment tool designed to help first-time home buyers afford their initial run at the housing market.
Combining aspects of tax-free savings accounts and registered retirement savings plans, the FHSA is a registered account in which you can save up to $40,000 for use as the down payment on a house.
Find out whether the FHSA can get you closer to buying your first home.
FHSA eligibility requirements
To open a First Home Savings Account, you must be:
A resident of Canada.
At least 18 years old.
A first-time home buyer.
Younger than 71 in the year you open the account.
You’re a first-time home buyer if you:
Have not lived in a home you owned in the calendar year before opening your FHSA.
Have not lived in a home you owned at any time in the preceding four years.
Don’t own property through beneficial ownership, like a corporation.
FHSA contribution limits
In the first year you have an FHSA, you can contribute up to $8,000.
If you don’t hit the limit in any year, the unused amount carries over. If you contribute $4,000 in 2025, for example, you’ll have $12,000 worth of contribution room to work with in 2026.
There is a lifetime contribution limit of $40,000.
Like an RRSP, eligible contributions are tax-deductible.
You can use the money in your FHSA to purchase various investment products, like mutual funds, stocks, bonds and guaranteed investment certificates. You won’t have to pay taxes on any of the gains these investments generate, which is a nice perk.
Other FHSA contribution rules
In addition to the $8,000 yearly and $40,000 total contribution limits, keep these rules in mind when funding your FHSA.
Unlike with RRSPs, your annual FHSA contribution limit applies to a calendar year, and doesn’t include the first 60 days of the following year. After December 31, the contribution time for any particular year is up.
You can hold more than one FHSA, but your annual and lifetime contribution limits apply as if the accounts were a single unit. In other words, if you have two accounts, each account does not have its own $8,000 annual contribution limit.
If you go over your annual contribution limit, you’ll be taxed at a rate of 1% per month on the excess contribution amount until the excess amount is removed from your FHSA. If you don’t withdraw the over-contribution, it will be applied to next year’s total once January 1 rolls around.
You can help your spouse or common-law partner contribute to their FHSA by sharing funds with them, but whatever money you provide can’t be claimed as a deduction for tax purposes.
FHSA withdrawal guidelines
When you purchase your first home, you submit a request to your FHSA issuer that confirms your eligibility to make a qualifying withdrawal. If all’s well, you’ll receive your savings and put the full amount toward your down payment, deposit or closing costs, tax-free.
Because the First Home Savings Account is designed to help home buyers, only withdrawals put toward a home purchase will qualify and receive tax-free treatment.
To make a qualifying withdrawal, you must:
Be a first-time home buyer and reside in Canada at the time of your withdrawal.
Have a written agreement to buy or build a home in Canada before October 1 in the year after the year of withdrawal. For example, if you plan to withdraw your FHSA funds on December 1, 2025, you’ll need an agreement in place by October 1, 2026.
Intend to use the home as your principal residence within one year of buying or building it.
Non-qualifying FHSA withdrawals will be added to your taxable income for the year in which you make the withdrawal, which could lead to an outsized tax bill. Your FHSA provider will also withhold tax on non-qualifying withdrawals..
You can, however, transfer money from a First Home Savings Account to an RRSP or registered retirement income fund without triggering taxes. Generally, these transfers won’t affect the limits for your lifetime FHSA contributions or RRSP contributions.
Will the First Home Savings Account help you buy a house?
That’s the $40,000 question. Answering it means weighing the FHSA’s benefits and drawbacks.
TFSA pro: Tax advantages
The tax implications of an FHSA can be quite helpful.
The deductions can create a larger annual tax refund, which can be funnelled into your FHSA and help grow it faster. The money you save by not having to pay tax on your investment gains means you keep more of your earnings.
Depending on how much your tax refund improves, you could also use it to pay down outstanding debt and improve your credit standing — all things that may help you get approved for a mortgage at a lower interest rate in the future
TFSA con: Modest contribution limit
Unless housing prices fall dramatically, FHSAs won’t cover much more than deposits on pre-construction properties or closing costs in most markets. And in the five years it takes to save the full $40,000, further increases in housing prices could outpace the FHSA’s tax-saving benefits.
But if you’re determined to buy a house in five years or more, socking $40,000 away in a FHSA is arguably a better option than stashing it in a high-interest savings account or a TFSA that isn’t being used for investing.
And if that first home remains elusive, you can always transfer your FHSA savings to an RRSP or RRIF and feel good about putting some money away for retirement. It’s not a bad Plan B.
Is the FHSA better than the Home Buyers’ Plan?
It depends how you look at it. The Home Buyers’ Plan allows you to use up to $60,000 of your RRSP savings for a first home purchase, which would provide a larger down payment boost than an FHSA. But unlike the HBP, the FHSA doesn’t require you to repay the amount withdrawn.
You have the option of combining your FHSA with the Home Buyers’ Plan and giving your home buying budget even more juice. But because of the FHSA’s annual contribution limits, it’ll take time to grow your account’s balance. That may not be helpful if your RRSP is already well funded and you’d like to buy a home sooner than later.
Where can you sign up for an FHSA?
You can set up a First Home Savings Account at any financial institution that offers TFSAs and RRSPs: banks, credit unions, life insurance companies and Canadian trust companies. An FHSA should be easy to open and fairly straightforward to use.
Some institutions currently offering FHSAs include: You can sign up for an FHSA at:
Frequently asked questions
How much can I contribute to my FHSA in 2025?
How much can I contribute to my FHSA in 2025?
The annual contribution limit in 2025 is $8,000. Any amount you don’t contribute can be carried over to the following year. If you save $5,000 in an FHSA in 2025, for example, you’ll have an $11,000 contribution limit in 2026.
Is an FHSA worth it?
Is an FHSA worth it?
There aren’t too many drawbacks of opening an FHSA. You’ll enjoy tax benefits and can potentially increase your home buying fund by making savvy investments with your deposits. If you don’t buy a home, you can always transfer your FHSA funds into an RRSP.
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